The Role of Valuation in Asset Liquidation

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The Role of Valuation in Asset Liquidation
Determining Fair Market Value 0 Comments /
Liquidation / By Viv1
Navigating Individual Insolvency Insights from
October to December 2023 24/05/2024
When an organisation ?nds itself falling on hard
times and having to go into liquidation as a
result there are a number of different steps
that need to be followed. One of the main ones is
that the assets of the company will be sold off
in order to settle the liabilities which are owed
to creditors. As such, valuation is clearly an
incredibly important part of the liquidation
process, but who gets to decide what assets are
sold and determine how much they are worth? All
will be discussed in the below article.
Who Is Responsible for the Liquidation
Process? In the majority of cases, the creditors
of the organisation are those who have the ?nal
say in what happens to the assets of the
company. This is due to the fact it is the
creditors who are owed money by the company and
as such, they have a valid interest, given they
are trying to recoup as much of the money theyre
owed as possible. The creditors are usually
responsible for hiring a liquidator and then that
liquidator has to act in the interests of both
the company which is being liquidated and the
creditors. This liquidator will be responsible
for taking charge and overseeing both the
valuation and sale of the assets to get the best
price possible. There are certain situations
where this isnt necessarily the case and
instead, shareholders can have a bit more of a
say over how various assets or both are valued
and sold. For instance, if the organisation
in question is a publicly traded business then
the shareholders of the business might need to
approve asset sales. In other cases, the court
might need to appoint a receiver to oversee the
liquidation process and also make sure that
various parties are treated fairly. As such,
though it isnt likely going to be shareholders
or the court who decide on what assets need to be
sold in company liquidation and what their
values are, those two parties can still largely
in?uence the process. Depending on the
circumstances, it may be that they are even able
to block the sales of certain assets from taking
place.
What Company Assets are Usually Sold During the
Liquidation Process?
When a company initially goes into liquidation,
it needs to sell off different assets in order to
properly pay off its debts. There are several
assets that these could be, including physical
assets such as raw materials, machinery and
buildings, as well as intangible assets like
patents and copyrights. In other cases, the
company name and logo will often be sold as a
means to obtain various additional funds. When
these assets are sold, the proceeds are used to
pay off the debts which are owed to creditors. If
there are any remaining funds once these debts
are paid then they are distributed to the
shareholders. The liquidation process can be a
relatively lengthy and complicated one and as
such, its important that businesses are working
with the right experts to make everything as
straightforward as possible. What Happens to a
Businesss Assets When a Company is in
Liquidation? When an organisation goes into
liquidation its assets are sold so that the
company in question can pay off its debts. These
sales include both the companies physical assets
and intangible assets. The proceeds go to
creditors and then anything left over is
distributed amongst the relevant
shareholders. In some cases, the shareholders of
the company might be responsible for some of the
outstanding debts of the company. In other
cases, it may well be the case that the creditors
are able to claim for certain assets of the
company so that they can recoup their losses.
Regardless, the liquidation generally ends with
the loss of the assets of the business. Who Is
Responsible for Valuing a Companys Assets? If a
company does go into liquidation then it will be
the job of the liquidator to value the assets of
the company. The process of valuation can be
incredibly complex because there are lots of
different factors that can impact how valuable
certain assets are, which include the likes of
conditions of the market, how old the assets are
and what other liabilities are outstanding. The
liquidator will be responsible for working with a
team of different experts (usually RICS chartered
surveyors) to appraise the assets and in turn,
determine what their value is. Once these assets
have been appropriately valued, the liquidator
is going to be responsible for selling them off
in order to pay off the debts of the company.
Proceeds are used to pay back both shareholders
and creditors, it depends on what asset has been
sold. Who Speci?cally is Paid with
Proceeds? The answer to this question depends
largely on the type of asset that has been sold.
For instance, if the asset is some real estate
then the proceeds are going to be sent to the
owner of the property or the charge holder. That
being said, if the asset is a business then the
proceeds are going to be paid out to the
shareholders of said business.
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The proceeds, in some cases, will also be paid
straight out to the shareholders which depends
ultimately on the arrangement that has been made
between different parties and at what date the
debt was incurred. Anything that has been put up
as collateral for a loan needs to be sold for the
loan to be paid back. Do You Need Help with
Asset Valuation and Sale? As stated above, the
liquidation process can be relatively complicated
and as such, you should make sure you are
working with expert liquidators such as Simple
Liquidation who will be able to assist with the
process. Our team will sit down with your
business in order to better understand what your
current situation is and subsequently provide
advice on your best way forward in terms of both
the sale and the valuation of various assets. If
you have any questions or require any further
information then do not hesitate to get in touch.
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